'Everyone goes hungry' as farm economy suffers

Friday

Jul 7, 2017 at 9:00 AMJul 9, 2017 at 12:42 PM

Amy Bickel @KansasAgland

The seat of his combine is a good place for Tom Giessel to reflect and ponder.

He is cutting a bumper stand of wheat on the outskirts of Larned - a unique ”sweet spot” in Kansas, he calls it. This parcel is located next to a new grade school where crews on this day are busy putting finishing touches on before it opens in August.

He and his wife, Sheryl, gifted the land, once part of his wheat acreage, to the youth of Pawnee County.

They are the future, he said. The community has done a lot for his family over the years, and it is a small token they can give back.

But in the same breathe, he worries about the county’s backbone. Larned was built around farming, but farmers in Kansas and the nation haven’t been able to make much, if any, money for at least two years. Profits margins are thin and some farmers are making just enough to get by - enough to plant another crop this fall.

Some are in the red.

At 64, Giessel has seen the highs and lows of the farm economy. But he knows there are many his age who have worked their lives to pay off their farms and are now getting back into debt.

He fears there could be a rip in the social fabric keeping small Kansas towns like Larned vital. As farmers cut back, the pinch ripples along rural main streets. It affects those selling everything from combines and tractors to pickups, fertilizer and seed.

“Whenever you have low prices like this, everyone goes hungry,” said Giessel. “County governments, state governments and rural economies suffer along with the farmer.”

Selling over the scales

The depressed prices for wheat, corn, milo and other commodities - caused by a global glut of grain - is pushing some farmers further into debt. Record production for those commodities, especially for soybeans, helped soften the financial hit.

Net farm income for last year averaged $43,100 across the Kansas Farm Management Association’s membership. That’s up from the 2015 30-year low of $6,700 - a level not seen since the 1980s farm crisis.

However, it is down from the record highs farmers reaped from 2010 through 2014, when farm income was averaging between $130,000 to nearly $170,000 thanks to high commodity prices for both crops and cattle.

The supply-and-demand cycle is nothing new in farming. Big harvests often mean lower prices and vice versa. But while interest rates aren’t as high as 1980s levels, which caused many farmers to go out of business, cost of production is higher. That includes the cost to buy tractors and combines and seed and precision tools, said Clay Simons, a south-central Kansas economist with the Kansas Farm Management Association.

Wheat prices have risen from last year, when they dipped below $3 a bushel. On Thursday, the price was hovering around $4.50 a bushel. But most farmers, including Giessel, didn’t get to take advantage of the increase.

At Pawnee County Cooperative, Chief Financial Officer Kim Barnes said the cooperative bought a million bushels of wheat during the June harvest at $3.98 a bushel. Farmers are still finishing up some fields, but he estimated, so far, the elevator has purchased nearly 60 percent of the territory’s crop.

Only 5 percent of farmers deferred their payments until next year, he said.

“They need the cash now,” Barnes said. “A lot of people need cash to pay the spring crop input and a lot still are trying to catch up from last year. Everyone is kind of struggling.”

Last year, the cooperative bought half their farmers’ wheat crop for less than $3 a bushel.

“Sure, we have an uptick in the wheat price, which is going to help people pay bills, but it isn't going to completely solve the farm crisis we are in,” Barnes said.

The bottom line

“Farmers sort of produced their way out of 2016,” said Kansas State farm economist Mykel Taylor of last year’s high yields. “What we have been worried about this crop year is that we could go back to average yields.”

That could impact the farmer’s bottom line even more so than last year, she said.

“How bad it is for the individual farmer has to do with where they are at - the amount of debt they are carrying and how they are paying that off,” Taylor said. “We are seeing negative cash flows. Costs are above returns. That is what we are concerned about. That means several years of not being able to pay off their debt and that builds up.”

Such an economy makes it tough for farmers wanting to retire and hand their operations over to the next generation, she said. It was one of the issues she heard during a winter road tour with other K-State economists to discuss the farm economy.

Farmers also wanted to know how long the downturn would last. But Taylor said she doesn’t have a crystal ball. All she could tell them was not to treat it like it was going to be over in the next few months.

“Plan for this to be bad for a few years,” she said. “If it turns around before then, great, but if it doesn’t ... you are still in the best situation you can be.”

During the meetings, she noticed the different levels of worry. The veteran farmers faces showed they knew what was happening - they had weathered similar storms before.

“It was a different look than the one on the younger producers’ faces,” she said. “They had a look of concern that they haven’t been through this before. They don’t know what is on the other side of it.”

But for farmers who can make it through by tightening their belts, there are opportunities on the other side.

“You try to get your machinery to last a little longer, you don’t buy new pickups or cars, you are watching every penny you spend,” she said.

“I always felt better when these guys brought their wives,” she added, noting that means these conversations are happening in the home.

For the community

As Giessel cuts his sweet spot of wheat, custom cutter Steve Schelske laments about his harvest at home.

He’s lost count how many years he has helped Giessel cut his crop - at least a dozen, he said. Larned is typically his only stop on the custom harvest trail before heading back to South Dakota to cut wheat and fall crops.

The Kansas stop is a bright spot. Drought hurt the crop in South Dakota.

“I don’t know if 30 percent of the wheat will make grain,” he said.

Cutting his costs, Schelske decided not to make a new combine purchase this year. He’ll make some profit, but not a lot, he said.

More farmers should be worried, said Giessel.

“People are kind of glazing over the fact we have low price because they have a decent yields,” he said. “Reality is going to set in real soon when you go to the elevator and you walk out with that check, and it isn’t going to go far enough. You can’t spread it that thin.”

In 2016, he was selling wheat at $5.80 a bushel - a price he contracted for the prior year. This year, most of his wheat was sold at around $4.

“There is no way in God’s green earth you can raise wheat for $4 a bushel,” he said. “If you are, you really are extracting a lot of wealth from your community. We can produce wheat for that price, but will it support a community, will it support a family, will it support a farm?”

He hears of farmers planting more western Kansas acres to dryland corn. He sees the new varieties helping boost yields, along with new technologies and precision tools.

He sees the surplus of commodities at the grain elevators, which is driving prices downward.

Giessel, as he contemplates it all on his combine, says aloud something most farmers might not admit.

Feeding the hungry?

“We are planting ourselves in a hole and maybe we shouldn’t plant so much,” he said. “You don’t see an implement dealer with 20 ro 30 combines on the lot thinking, if we can make them we can surely sell them. We have to understand, we can’t produce ourselves into prosperity with humongous volumes of grain.”

Industry leaders talk about feeding the hungry, he said, “and what a wonderful thing if we could achieve that.” But most of the world’s population can’t afford the commodities being produced.

There’s not a good answer or a simple solution, Giessel said. His own rotation includes fallowing acres - raising two crops in three years on his dryland acres. He said he wants to leave the land in better shape for the next farmer who comes along.

Some years are more of a struggle, but Giessel keeps going. He pours his soul and heart into farming. He wants to better his community.

“I guess I don’t want to give up,” he said. “That is the nature of farmers. There is no greater feeling than to harvest a crop or bring an animal to maturity or work with nature. … It gives a real sense of being human and being part of something greater than ourselves. Those are the things that really count.”

That includes helping the next generation. At the new school, he sees a solid crop of young people getting their education.

“That’s the best crop that will ever come off that land,” he said.

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